Adjustable-Rate versus Fixed-Rate Mortgages

April 13, 2020 Mortgage Refinance,Mortgages

MoneyTips

Congratulations! You have saved up enough money to purchase a home — now it is time to look at mortgage options. Is a fixed-rate mortgage or an adjustable-rate mortgage (ARM) better for your situation?

It depends on your finances, your goals, and the overall market circumstances. Generally, ARMs provide lower interest rates than fixed loans in the early years, but contain more long-term risk.

A fixed rate loan is simple to analyze. You pay a fixed rate over the entire life of the loan and have predictable monthly payments regardless of market rates. Therefore, a fixed-rate loan is more attractive when current interest rates are low and/or likely to rise in the future (like now).

While a fixed-rate loan is usually better during times of low interest rates, you may want to consider an ARM in these cases:

  • If you plan to sell or move wi…

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